The CleanTech Opportunity of the Month is in PanamaAug19

We’ve asked Hedge Connection contributor Craig Shields, a senior consultant to the cleantech industry, to send us a monthly article discussing one of the more exciting business opportunities he’s come across recently in his field of engagement. Craig finds himself in a unique position to make such a submission: via his website, 2GreenEnergy.com, he reviews many hundreds of business plans annually from cleantech entrepreneurs all around the globe. He has 9000 subscribers to his newsletter, most of them hard at work in the development of some sort of cleantech concept: perhaps introducing a new invention or a new business model, perhaps a standard implementation of solar, wind, biomass, hydro, or geothermal – or a project in a related field: energy storage, smart grid, or electric transportation.

You’ll struggle to find someone who comes across more concepts in cleantech. While some of these, obviously, are stronger than others, the sheer volume enables Craig to select a few whose merit is hard to dispute.

The following is Craig’s first such submission in which he presents a summary of one of his personal favorites; we hope you find it worthwhile.

Waste-to-Electricity Plants in Panama

The website 2GreenEnergy.com, now in its sixth year, endeavors to bring together entrepreneurs in renewable energy and related disciplines with the sources of investment capital they need to take their business concepts forward. As the site’s editor, this has required me to review literally thousands of ideas (inventions, new business models, unique implementations of old technology, etc.) with an eye towards identifying those that appear to hold real promise. Though the process has been time-consuming, it’s been both interesting and rewarding.

Now that the good people at Hedge Connection have asked me to offer a summary of a few of the most interesting ideas I’ve come across, I’ve agreed to submit a short piece on a monthly basis. To that end, here are a few words on a waste-to-energy project in Panama that I think is extremely attractive.

The first thing the reader should understand is that everything I see contains at least one missing element; if it didn’t, I never would have seen it in the first place. Take, for example, a shovel ready PV or wind energy project with a PPA in place in Japan, the UK, maybe Ontario, Canada, or some other part of the world with a feed-in-tariff that’s so fat and juicy that the risk is so low and the IRR so high that anyone in the banking community with the IQ of a turnip would snap it up. That’s not something I would see, because the turnip would have seen it first.

But consider a more interesting case—like this one. The developers have invested more than $2.5 million of their own money into a set of three connected projects whose total cap-x is just over $250 million—and it’s micro-close to shovel-readiness.

In particular, the developer is building three profitable waste-to-electricity plants in Panama, i.e., Latin America’s leading financial center. Knowledgeable U.S. and European investors have been flooding to Panama for the past decade, so as to situate themselves in one of the world’s most impressive sustained economic growth rates.

The business plan’s financial calculations were prepared by former executives of Accenture and PWC, ands show that each plant will operate at approximately 50% profit margins, produce EBITDA of $22 million annually per plant, and use proven technology.

These no-emissions, non-incineration, waste-to-electricity plants use a gasification technology that has successfully been in commercial use in 100 plants around the world for the past 10 years. In addition, efficacy insurance guaranteeing the equipment’s functionality/operation is available by the international insurance giants AIG and AON.

The developer has secured a commitment for cap-x funding from one source, and is currently negotiating competitive terms with two other funding sources.

Most importantly, the key elements for success are already in-hand. The couple items not yet in-hand are nonetheless very much “at” hand, and are immediately available, shortly after the receipt of a comparatively small sum of bridge funding.

Following is a summary of the project’s current status:

Political Support. The electrical plants enjoy the strong backing of Panama’s highest elected officials, including the President of Panama and his Cabinet, and the Governors and Mayors of the respective municipalities where the plants are to be developed.

Environmental Approvals. The developer has received approvals from ANAM, Panama’s environmental agency, with a remaining approval available within a month.

Land Lease Agreement. Contract is in hand.

The Feedstock (Municipal Waste Supply). Contracts are in hand.

Power Purchase Agreement. An agreement-in-principle has been reached with ETESA (Panama’s electrical company) to purchase all of the electrical output at favorable prices. A formal PPA contract is available, pending bridge funding for attorney fees.

EPC (Construction) Contract. Negotiation completed.

Land & Building Siting. Completed.

Municipal Waste Analysis. Completed.

Technology Licensing Agreement. Completed.

Business Plan, Staffing. Completed.

Municipal Community Presentations & Hearings. Completed.

Construction Timetable. Project will be completed and electrical generation will begin within 15 months from the start of construction.

Thousands of professional man-hours of work have been invested by teams of engineers, accountants, businessmen, developers, public affairs executives, scientists, construction managers, attorneys, and others to bring the project to its current point of readiness. The investor who commits to the bridge loan is investing in a profitable renewable energy project providing clean electricity to the government and people of Panama – a project that already has millions invested to date by its developers, and one with extraordinary growth potential.

The funds from the bridge loan will be used as working capital for the costs of completing checklist items

required for the contract with Panama’s electrical company. A detailed “use of funds” is available.

Needless to say, I’d be happy to entertain any and all questions about the project, or put Hedge Connection readers directly in touch with the deal principle.

7 Responses to “The CleanTech Opportunity of the Month is in Panama”

Cameron Atwood

Intriguing stuff here. I’ve known Craig for a number of years, and I’m consistently impressed by his passion, his intellect, his business acumen and his ethics. I’ll enjoy seeing this project move forward.

Craig Shields

Ravindra Srinivas Rao

I have developed a new technology for Low Cost Sustainable Transportation. This is for application for India where there are many small towns and these towns cannot raise funds for a conventional public transit system. Due to low ridership a bus transport becomes unviable. This has resulted in many middle class people opting for personal two wheelers which have very low fuel efficiency, are highly polluting, are very noisy and create traffic congestion.

These small towns need a public transit system which need low investment and which have very low operating costs.

I would like to engage with investors from the Hedge Connection to present to them the business opportunities available in India.

Craig:
I have been in the energy field for 30 years based on financial returns. Energy is the currency of nature. My fund, Craigmillar, has a track record of over 15 years ahead on the S&P 500 index. Decarbonization is the process for picking global stocks. The standard deviation is close to the S&P 500 Index (15-20) and is diversified around sectors, growth and value and capitalization. Robert Preston /robertsprestoniii@gmail.com /Portfolio Manager – Craigmillar Fund. The fund is based in Arizona with the InteractiveBrokers. Clark Gates is the President based in Tucson, AR.
Bob

Big Waste-to-Energy projects are about are a good thing to have in the war against global warming, but they alone are not enough. They are the equivalent to the ‘big bombers’ of World War II. What are also needed are the thousands of smaller projects, the “fighters” that flew alongside the bombers.

Increasing fossil energy imports of many poor nations that lack their own fossil fuels supplies will cost them billions of dollars in coming decades and these big projects that are designed to save millions are simply not enough to win the war without fighter support.

Is there a better way to provide power generation without increasing expensive, dirty energy imports?
Some experts believe the answer lies not in increasing the number of centralized power plants, but in creating “virtual” power plants that quickly adapt to changing energy needs and thereby can back up wind and solar resources.

Virtual power plants are destined to be one of the main components of the smart grid. They can match up numerous distributed energy systems with intelligent demand response capabilities and aggregate those resources into an asset that acts like a centralized power plant. VPPs can be deployed on a GW-scale.
“I would not be surprised if utilities put an increased focus on this concept moving ahead. Already more digitally advanced they will provide the foundation of the new paradigm.

Big Waste-to-Energy projects are a good thing to have in the war against global warming, but they alone are not enough. They are the equivalent to the ‘big bombers’ of World War II. What are also needed are the thousands of smaller projects, the “fighters” that flew alongside the bombers.

Increasing fossil energy imports of many poor nations that lack their own fossil fuels supplies will cost them billions of dollars in coming decades and these big projects that are designed to save millions are simply not enough to win the war without fighter support.

Is there a better way to provide power generation without increasing expensive, dirty energy imports?
Some experts believe the answer lies not in increasing the number of centralized power plants, but in creating “virtual” power plants that quickly adapt to changing energy needs and thereby can back up wind and solar resources.

Virtual power plants are destined to be one of the main components of the smart grid. They can match up numerous distributed energy systems with intelligent demand response capabilities and aggregate those resources into an asset that acts like a centralized power plant. VPPs can be deployed on a GW-scale.
“I would not be surprised if utilities put an increased focus on this concept moving ahead. Already more digitally advanced they will provide the foundation of the new paradigm.